American files for Chapter 11

An American Airlines employee works at the counter of the airline's gate at LaGuardia Airport. The Port Authority has said American's bankruptcy will not affect its operations at the two Queens airports. AP Photo/Seth Wening

Elected officials in southeast Queens say they are not too worried about American Airlines’ bankruptcy negatively affecting the neighborhood’s commerce, but they will be keeping a close eye on their future operations.

The airline’s parent company, AMR Corp., filed for Chapter 11 reorganization bankruptcy last week due to a growing debt it incurred over the rising costs of operations, the company said. Despite the financial burdens, the airline will keep flying its aircraft to various destinations and operate its major terminal at John F. Kennedy International Airport.

“American is committed to continuing to provide our customers with the excellent service and safe, reliable travel experience they expect from us,” the airline said in a statement.

U.S. Rep. Gregory Meeks (D-Jamaica) said he was not surprised with American’s decision since other major carriers, including Delta and United Airlines, have filed for Chapter 11 over the last 10 years.

He noted that the other airline companies have remained in business despite filing for Chapter 11 bankruptcy protection from creditors due to in their work at JFK.

“I would think in order for it to remain competitive it would have to keep up its operations at Kennedy — especially the international operations,” he said of American.

The airline has not indicated whether or not staff cuts are imminent as part of the restructuring, but Meeks and City Councilman James Sanders (D-Laurelton) said they did not think it would affect the thousands of Queens residents who work for American at JFK.

“It is merely a matter of a paper reorganization. Those implications have little effect on us,” Sanders said.

The councilman said the airline has a major “cash cow” at the airport with Terminal 8, which it completely renovated four years ago. Sanders said the terminal is still operating well and could be lucrative for the airline.

“No one gets rid of their cash cow unless they are truly at their end of days,” he said.

Creating that cash cow, however, may have created American’s current financial situation.

The bond yields on $800 million American secured to make the terminal increased from 8 percent in October to 11 percent last month and ultimately crippled their finances, according Reuters.

The Port Authority, which runs JFK, said American would continue to fly as normal while it works on its restructuring, but court papers show the agency may also be in financial trouble because of American Airlines’ bankruptcy. The PA is one of the creditors listed in American’s bankruptcy filing along with the other cities where the airline has major hubs.

The councilman said that despite the positive outlook he has on American’s situation, he acknowledged that it does create a negative impact on the psyche of residents who are looking for a break during the rough economic times.

“It’s just one more nail in the coffin of a seemingly emerging recovery,” Sanders said.

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